Address correspondence to Ning Jackie Zhang, M.D., Ph.D., M.P.H., Doctoral Program in Public Affairs, College of Health and Public Affairs, University of Central Florida, Orlando, FL. Lynn Unruh, Ph.D., R.N., is with the Department of Health Professions, College of Health and Public Affairs, University of Central Florida, Orlando, FL. Thomas T. H. Wan, Ph.D., M. H. S., is with the Doctoral Program in Public Affairs, College of Health and Public Affairs, University of Central Florida, Orlando, FL.
Has the Medicare Prospective Payment System Led to Increased Nursing Home Efficiency?
Article first published online: 19 OCT 2007
© Health Research and Educational Trust
Health Services Research
Volume 43, Issue 3, pages 1043–1061, June 2008
How to Cite
Zhang, N. J., Unruh, L. and Wan, T. T. H. (2008), Has the Medicare Prospective Payment System Led to Increased Nursing Home Efficiency?. Health Services Research, 43: 1043–1061. doi: 10.1111/j.1475-6773.2007.00798.x
- Issue published online: 19 OCT 2007
- Article first published online: 19 OCT 2007
- Nursing home efficiency;
- SNF PPS;
- nurse staffing and nursing home efficiency;
- DEA analysis of efficiency in nursing homes
Research Objective. To assess the impact of recent Medicare prospective payment system (PPS) changes on efficiency in skilled nursing homes.
Data Source/Study Setting. Medicare Cost Reports (MCR), On-line Survey Certification and Reporting System (OSCAR), Area Resource Files (ARF), a Centers for Medicare and Medicaid Services (CMS) hospital wage index website, a Consumer Price Index (CPI) database, and a survey of state Medicaid reimbursement rates. The sample was 8,361 nursing homes in the Medicare Cost Report databases from the years 1997 to 2003.
Study Design. Data-envelopment analyses (DEA) calculated efficiency scores for three separate DEA models: unadjusted, acuity-adjusted, and acuity-and-quality-adjusted efficiency. The efficiency scores from these models were regressed on the Medicare PPS changes (the Balanced Budget Act [BBA], the Balanced Budget Refinement Act [BBRA] and the Benefits Improvement and Protection Act) and other organizational and market explanatory variables using a panel-data truncated regression.
Principal Findings. Mean values for all efficiency measures decreased over time, the acuity-quality-adjusted efficiency measures decreasing the most. All policy variables were significantly negatively related to all efficiency measures. Higher nurse staffing was negatively related to efficiency in all but the acuity-quality-adjusted model. Other explanatory variables varied in their relationships to the efficiency variables.
Conclusions. The results suggest that the reimbursement policy changes had a significantly negative impact on efficiency. Higher nurse staffing contributed to lower efficiency only when efficiency was not adjusted for quality. Various organizational and market factors also played significant roles in all efficiency models.